Texas Restructuring |
Texas Electric Restructuring
Texas began electric industry restructuring with 1995 legislation creating customer choice and competitive generation markets. Investor-owned utilities, which had been regulated by the PUCT (Public Utility Commission of Texas), were required to participate. Municipal and cooperative utilities could choose to follow the new model or maintain their current structure.
Before electric restructuring, utilities owned integrated systems: generation facilities (power plants), high-voltage transmission lines (the grid), and lower voltage distribution lines, and individual customer meters. Customers received one bill, at a price set by the PUCT.
In restructuring, utilities separated generating assets from the rest of the company. Consumers could purchase electricity from marketers other than their local utilitiy, and utilities were required to provide open access to marketers, allowing them to serve end-use customers.
Additional information on Texas electric restructuring can be found in the following sources:
- The U.S. Energy Information Administration 8-page summary of the Texas energy markets is here.
- A 10-page overview of Texas electric markets, demand, and prices, issued by the FERC, is here.
- A 10-page presentation on the state's future energy needs, issued by ERCOT in February 2007, is here.
- The 2006 PUCT publication, "Report on the Need for Transmission and Generation Capacity in Texas: Renewable Energy Implementation and Costs," is here.
- An 84-page Report to the Texas Legislature on the Scope of Competition in Electric Markets in Texas, issued in January 2005, here, reviews electricity prices in wholesale and retail markets, numbers of customers switching to alternative power providers, and other data.
- Links to additional PUCT electric industry reports are here.
- A timeline of the Texas Electric Energy Restructuring, starting with the 1995 Texas Senate bill, is here.
Creating Competitive Generation Markets
Prices for power from new generating facilities were not regulated, but they required air quality operating permits from the Texas Commission on Environmental Quality (TCEQ).
Integrated utilities were required to auction off entitlements for at least 15 percent of their generation facilities to encourage the development of a competitive generation market and to provide open access to wholesalers with contracts with end-use customers. During a transition period ending December 31, 2007, local utilities offered generation services for consumers who did not choose an alternate provider-first a "provider of last resort" and second, offering a "price to beat" service. By July 2006, 39 percent of retail customers were served by a provider other than their native retail electric provider.
Constructing new generation facilities required permits for land use and air-quality emissions, but there was no forum to prove the need for the facilities, nor were they guaranteed a rate of return. A PUCT map and listing of new and proposed generating facilities in Texas since 1995 is here.
The tab TXU and Texas Generation gives more details on the competitive generation market.
Regulating Transmission and Distribution
Prices for transmission and distribution (the "wires" companies) remained regulated by the PUCT. A new agency, ERCOT (Electric Reliability Council of Texas), was set up to manage the transmission grid and monitor competitive generation markets. Since electricity cannot be stored, generation must follow system demand on a real-time basis. ERCOT controlled the minute-by-minute dispatch and bought and sold power on the margin to keep the system in balance.
ERCOT is a regional transmission organization (RTO). Unlike other RTOs in the U.S., ERCOT is within one state and has few interconnections to other regions. Thus it is regulated by the Public Utility Commission of Texas (PUCT), rather than by the Federal Energy Regulatory Commission (FERC).
ERCOT schedules and centrally dispatches the grid to ensure reliability in the deregulated energy market. It oversees the competitive retail market. It monitors load (power supply and demand) and manages congestion in the grid. It makes long-range forecasts on the need for additional investment in generation and transmission. It monitors the state of the market and generation prices in its region to ensure wholesale open access. It designates "must-run" facilities and purchases energy to balance the system and to manage congestion within subregions or zones.
ERCOT's website is here.
ERCOT's report on the state of the market in 2006 is here.